N.Y. Banking Law § 643: Bond or securities

§ 643. Bond or securities. 1. As a condition for the issuance and

retention of the license, applicants for a license and other licensees

shall, within thirty days after notice by the superintendent, or such

longer or shorter period as he or she shall prescribe, file with the

superintendent one or more corporate surety bond or bonds, as required

below, in form satisfactory to him or her and issued by a bonding

company or insurance company authorized to do business in this state.

One bond shall be in favor of the superintendent and in such principal

amount as he or she shall determine is necessary or desirable for the

protection of the purchasers and holders of New York instruments sold or

to be sold by the applicant or licensee, provided, however, that until

June first, nineteen hundred seventy-seven, the principal amount of such

bond shall be no less than two hundred ten thousand dollars and on and

after June first, nineteen hundred seventy-seven, the principal amount

of such bond shall be no less than five hundred thousand dollars. If the

applicant or licensee intends to engage or engages in the sale of New

York traveler's checks, such applicant or licensee shall file with the

superintendent a separate bond. Said bond shall be in favor of the

superintendent and in such principal amount as he or she shall determine

is necessary or desirable for the protection of the purchasers and

holders of the New York traveler's checks sold or to be sold by the

applicant or licensee; provided, however, that the principal amount of

such bond shall not be less than seven hundred fifty thousand dollars,

unless the superintendent, for good cause shown, shall have determined

that a lesser amount will adequately protect the purchasers and holders

of the New York traveler's checks sold or to be sold by such applicant

or licensee.

In making any determination under this subdivision, the superintendent

may take into account the financial condition of the licensee, the

number of locations in this state at which the licensee, either directly

or through agents, transacts the business of selling New York

instruments or New York traveler's checks, the controls imposed on such

agents or, and the possible exposure of purchasers and holders of New

York instruments and New York traveler's checks to loss in the event of

the insolvency, bankruptcy or other financial impairment of the

licensee. The proceeds of each bond shall constitute a trust fund for

the exclusive benefit of the purchasers and holders of the New York

instruments and New York traveler's checks, as the case may be. Except

as otherwise provided in the following sentence, in the event of the

insolvency or bankruptcy of any licensee, the proceeds of the bond or

bonds held for the exclusive benefit of the purchasers and holders of

New York instruments and the proceeds of the bond or bonds held for the

exclusive benefit of the purchasers and holders of New York traveler's

checks shall be paid to the superintendent forthwith for disposition in

accordance with the provisions of this article. If any New York

instruments have been assigned to the fund, the proceeds of the bond

held for the exclusive benefit of the purchasers and holders of New York

instruments shall constitute a trust fund for the benefit of, and shall

be payable to, the fund to the extent of such assignment. From time to

time, the superintendent may require, upon thirty days notice or such

longer or shorter period as he or she shall prescribe, that such bond or

bonds be increased if he or she shall determine that such increase is

necessary or desirable for the protection of the purchasers and holders

of New York instruments and New York traveler's checks.

2. The licensee shall give notice to the superintendent by registered

or certified mail of any action which shall be brought against him and

of any judgment which shall be entered against him by such purchaser or

holder of a New York instrument or a New York traveler's check, with

details sufficient to identify the action or judgment, within ten days

after the commencement of any such action or notice to the licensee of

entry of any such judgment. The corporate surety shall within ten days

after it pays any claim or judgment to any such purchaser or holder of a

New York instrument or a New York traveler's check give notice to the

superintendent by registered mail of such payment, with details

sufficient to identify the purchaser or holder and the claim or judgment

so paid. Whenever the principal sum of such bond or bonds is reduced by

one or more recoveries or payments thereon the licensee shall furnish a

new or additional bond or bonds under the provisions of this section, so

that the total or aggregate principal sum of such bond or bonds shall

equal the sum required pursuant to the provisions of this section, or

shall furnish an endorsement duly executed by the corporate surety

reinstating the bond or bonds to the required principal sum thereof. The

liability of the surety on such bond or bonds to the superintendent and

to the said purchasers and holders of New York instruments and New York

traveler's checks shall not be affected in any way by any

misrepresentation, breach of warranty or failure to pay the premium or

by any act or omission upon the part of the licensee nor by the

insolvency or bankruptcy of the licensee or the insolvency of the

licensee's estate, and in the event of the death or dissolution or

liquidation of the licensee, shall continue upon all transactions

entered into by the agents of such deceased, dissolved or liquidated

licensee within a period of thirty days after the death, dissolution or

liquidation of the licensee or termination of the bond or bonds,

whichever date shall first occur, provided, however, that such

transactions were entered into in good faith by such purchasers and

holders of New York instruments and New York traveler's checks. Every

such corporate surety bond shall provide that in the event that a

judgment recovered against the licensee or its legal representative or

successor by any such purchaser or holder on a claim arising or a

transaction entered into during the life of the bond shall remain

unsatisfied after the expiration of thirty days from the service of

notice of entry of judgment upon the licensee or upon his legal

representative or successor or upon the attorney for the licensee, and

upon the corporate surety, or in the event that the fund has become an

assignee of any claim arising or a transaction entered into during the

life of the bond, then an action may be maintained against the corporate

surety under the terms of the bond (1) by such purchaser or holder for

the amount of such judgment not exceeding the amount of the bond, except

during a stay of execution of such judgment against the licensee or his

legal representatives or successors, or (2) by the superintendent, on

behalf of the fund, for the amount of such claim, not exceeding the

amount of the bond. The bond may not be cancelled either by the licensee

or the surety except upon notice to the superintendent by registered or

certified mail with return receipt requested, the cancellation to be

effective not less than ten days after receipt by the superintendent of

such notice.

3. In lieu of such corporate surety bond or bonds, or of any portion

of the principal sum thereof as required by this section, applicants for

a license and other licensees may keep on deposit, or may be required to

keep on deposit by the superintendent, with such banks, trust companies,

national banks, savings bank, savings and loan associations, federal

savings associations, credit unions, or federal credit unions in the

state of New York as such applicants or licensees may designate and the

superintendent may approve, and in accordance with such rules and

regulations as the superintendent shall from time to time promulgate,

interest-bearing stocks and bonds, notes, debentures or other

obligations of the United States or any agency or instrumentality

thereof, or guaranteed by the United States, or of this state, or of a

city, county, town, village, school district or instrumentality of this

state, or guaranteed by this state, or dollar deposits, to an aggregate

amount, based upon principal amount or market value, whichever is lower,

in the case of the above-described securities, of not less than the

amount of the required corporate surety bond or bonds or portion or

portions thereof. Such securities or funds shall be deposited to secure

the same obligation or obligations as would the corporate surety bond or

bonds filed under this section. So long as it shall continue business in

the ordinary course, such licensee shall be permitted to collect

interest on the securities so deposited and from time to time to

exchange, examine and compare such securities. In the event of the

failure or insolvency of such licensee, the securities, any proceeds

therefrom and the funds deposited pursuant to this section shall

constitute a trust fund for the exclusive benefit of the purchasers and

holders of New York instruments or New York traveler's checks, as the

case may be, or, in the event such New York instruments are assigned to

the fund, the securities, any proceeds therefrom and the funds deposited

pursuant to this section for the benefit of the purchasers and holders

of New York instruments shall constitute a trust fund, for the benefit

of the fund.

4. Notwithstanding the foregoing provisions of this section, if the

superintendent shall find that a licensee has transacted the business of

money transmission in this state for a period of five consecutive years

and that such business has been conducted honestly, efficiently and

safely and that the licensee's financial condition is sound and that its

New York instruments are insured, the superintendent may dispense with,

modify or eliminate any of the foregoing requirements of this section

with respect to New York instruments; provided, however, that if at any

time subsequent thereto, the superintendent shall deem it necessary or

desirable for the protection of the purchasers and holders of New York

instruments, to reinstate any of the requirements of this section, he

may do so.